hen the leadership of a country carries out its governing mandate in ways that seem unjust, it risks public wrath.
Present day Italy, amid unsustainable levels of public debt and unemployment, teeters on an economic precipice. Yet just when it sorely needs citizen confidence and backing to address its public financial woes, the new government has introduced a series of austerity measures that put tax increases, pension system reform, and tracking down tax cheats ahead of politically thorny cuts to its own swollen budget.
It has done this through legislation by decree, a governmental maneuver with a checkered history.
Mario Monti, who has a solid fiscal reputation, was appointed prime minister in November 2011 with a clear mandate to introduce badly needed tax and structural reforms. With bond markets roiling, snap general elections seemed out of the question. Instead, Monti handpicked a “technocratic” cabinet composed of unelected professionals to complete a caretaker government that once installed introduced tax reforms by decree in an effort to reassure Europe and the investment world that Italy was “on board” for austerity.
Included among the measures in Monti’s “Save Italy” reform package was the reactivation of local property taxes (“IMU”). Purportedly imposed to generate municipal revenues, a significant portion of the income will go to the coffers of the central government. The measure also included an untried and seemingly scattershot wealth tax on all assets, real property (“IVIE”), and investments (“IVAE”) held outside of Italy by residents. These are rife with potential for unequal taxpayer treatment and a recipe for mountains of red tape (particularly for Americans, who will have different paperwork than EU citizens).
Severe penalties are in place for those who fail to declare these assets for income tax purposes and for those who have failed to report the existence of such assets in the past. A better Draconian tax trap was never laid.
According to Article 77 of the Italian Constitution, legislating by decree is only to be applied “in the case of necessity and urgency.” But the “Save Italy” reforms were eventually passed into ordinary law. At the same time, the package was presented by the Monti government on a “take it or leave it” basis, approved by a “vote of confidence,” with no amendments or substantive discussion permitted. As a result, many see “Save Italy” as having been passed without true consent.
The immediate result has been an uptick in tax revenues. But there have also been incidents of violence and hostage taking at tax offices as well as an increase in threats against Equitalia, the agency that collects taxes for the state.
Seventeenth-century English philosopher John Locke theorized that rights to life, liberty and property were “natural rights” that came ahead of government and law. These were so-called inalienable rights. They could not be given up and, more importantly, could not be arbitrarily taken away.
From this premise, Locke posited that every individual is an “executor of nature”; the individual is invested with the right to punish anyone who steals his property, since it represents a violation of nature and thus constitutes an act of aggression. An aggressor can be treated as a predator, and even risk death for pursuing such behavior.
Since individual punishers can overshoot the mark, we agree as a society to surrender our individual enforcement powers to a democratically elected government so that it can, with the backing of majority vote, make laws that fit punishment to crime and draft legislation that serves the common good.
Critically, Locke made majority consent a fundamental government principle. A government should be compelled to govern on behalf of the people. There could be no monarchy or arbitrary rules.
This principal was never more active than in the case of the Boston Tea Party, the passionate response by American colonists to the British Parliament’s passage of the Tea Act of 1773, which levied a tax on tea the moment it landed on American soil.
The colonists considered the act as a law passed without consent and representation, and therefore void of political legitimacy. East India Tea Company cargo that arrived in Boston harbor that year on British vessels was forcefully thrown overboard before reaching the docks
Locke’s philosophy is embedded in the U.S. Declaration of Independence, ratified in 1776, three years after that explosive incident.
In Italy, the principle of “no taxation without representation” can be found in Article 23 of its constitution. It provides that “no obligation of a personal or financial nature may be imposed on any person except by law.” It is further enshrined in Article 4 of the Italian Taxpayers Bill of Rights, which states, “No new tax shall be enacted … by the enactment of a decree law”.
Italy desperately needs fiscal repair, but government determination to do just that must be tempered by a basic respect for the country’s fundamental laws. Otherwise, if it simply tosses seeds to the wind to see what takes, it may be unpleasantly surprised by what does.